Consumer companies flag demand recovery in Q3 aided by GST cuts, festive demand

Consumer staples companies are experiencing a notable turnaround in demand during the third quarter, marking the end of several lackluster quarters. The recovery is primarily attributed to GST reforms, heightened festive season demand, and cooling inflation rates that have improved consumer sentiment across both urban and rural markets.

Sector Performance and Growth Projections

According to Motilal Oswal analysis, the consumer sector is positioned to deliver exceptional performance this quarter. The research firm projects the sector could achieve its highest earnings growth in eight quarters, reaching 9% growth driven by festive-led demand recovery across discretionary and consumption-linked sectors.

Company-Specific Recovery Indicators

Leading FMCG companies have provided encouraging commentary regarding demand patterns and future prospects. Marico, the Parachute Coconut Oil producer, reported that underlying volume growth in its India business remained in high single digits, showing slight improvement on a sequential basis. The company expressed optimism about gradual consumption improvement in coming quarters, supported by easing inflation, lower GST rates driving affordability, MSP hikes, and healthy crop sowing seasons.

Dabur India observed early signs of demand recovery aided by GST rate revisions. The Chyawanprash maker noted that following GST rationalization in October 2025, distributors and retailers focused on liquidating existing higher-priced inventory. Post trade stabilization, consumer sentiment improved in both urban and rural areas, with rural demand continuing to outperform urban demand during the quarter.

Market Dynamics and Consumer Behavior

Godrej Consumer Products demonstrated confidence in gradual consumption improvement over coming quarters, supported by falling inflation and improving affordability following lower GST rates. The company is projecting double-digit revenue growth for the December quarter, driven by near double-digit underlying volume growth.

Discretionary Spending and Retail Expansion

The consumer discretionary segment also demonstrated strong performance during the quarter. Titan's jewellery portfolio experienced remarkable growth, jumping 41% year-on-year, supported by festive demand and soaring gold prices. This performance showcases increased consumer appetite for discretionary products.

In the retail sector, Trent recorded approximately 17% year-on-year revenue growth while expanding its footprint by opening 65 stores during the quarter. This expansion reflects continued upward trajectory in demand for value retail offerings.

Future Outlook and Market Sentiment

Analysts expect the recovery momentum to continue in the upcoming quarter, with studies indicating India ranks among the most optimistic consumer markets for 2026. Leading brokerages believe the consumption slump has bottomed out, with rising volumes anticipated ahead. The combination of favorable government policies, improved affordability through GST reforms, and stabilizing macroeconomic conditions positions the consumer sector for sustained growth in the coming quarters.